DBRS Assigns Provisional Rating to Bavarian Sky France, Compartment French Auto Leases 1

DBRS Ratings Limited (DBRS) has today assigned provisional ratings to the following notes issued by Bavarian Sky France, Compartment French Auto Leases 1 (the Issuer):

-- €356,800,000 Class A Notes at AAA (sf)
-- €41,800,000 Class B Notes at A (sf)

Bavarian Sky France, Compartment French Auto Leases 1 is a securitisation of a portfolio of lease receivables originated by BMW Finance S.N.C. (BMW Finance) in France. The portfolio consists of lease receivables related to lease contracts extended to private individuals and commercial entities on new and used vehicles. The underlying securitised portfolio of lease receivables relates to both lease instalments and vehicle realisation proceeds associated with leased vehicles upon termination of the underlying lease contracts. The transaction is therefore exposed to the underlying credit risk and residual value risk related to the portfolio. The proceeds of the subscription of the Class A Notes, Class B Notes and funds provided by BMW Finance through the Subordinated Loan will be used to purchase the €450 million portfolio and fund the €4.5 million reserve fund. The portfolio will be serviced by BMW Finance.

The ratings are based on review by DBRS of the following analytical considerations:

-- Transaction capital structure and form and sufficiency of available credit enhancement; the initial Class A Notes’ [20.71]% credit enhancement consists of the subordination of [9.29]% the Class B Notes and the [11.42]% overcollateralisation. The transaction is static and the amortisation of the notes will start on the first payment date. The amortisation of principal of the Class A Notes will be fully sequential with no payment of principal on the Class B Notes until the Class A Notes have been redeemed in full.

The Class A Notes and Class B Notes will be supported by the €[4.5] million reserve fund which covers senior fees, net swap payments and interest payment shortfalls on the notes. The reserve fund may also be used at legal final maturity date or when the cash reserve amount equals or exceeds notes outstanding balance of receivables, to cover any principal outstanding on the notes.

-- The ratings of the Class A Notes and Class B Notes address the timely payment of interest and full payment of principal by the legal final maturity date in accordance with the terms and conditions of the notes.

-- The portfolio consists of 100% lease receivables that pay an effective fixed interest rate while the notes pay a floating interest rate. The transaction will enter into a fixed to floating interest rate swap to mitigate the risk that may arise from any mismatch between the effective fixed interest rate paid by the portfolio of receivables and the one-month Euribor index paid on the notes.

-- As of March 2015, the lease receivable portfolio’s main characteristics as a percentage of the discounted balance include: (1) 18,592 lease contracts with an average lease contract discounted balance of €24,204, where the top 20 customers account for 0.42% of the portfolio; (2) 38.1 months weighted-average (WA) original term, 28.9 months WA remaining term and 9.2 months seasoning; (3) The portfolio WA internal interest rate stands at 5.57% and the WA discount rate stands at 6%; (4) 59.39% of the lease contracts were extended to private individuals and 40.61% to commercial entities; (5) 100% of the lessees pay via direct debit; (6) leases on new cars represent 89.33% and used cars 10.67%; (7) Dealer buy agreement lease contracts represent 36.50%; (8) the top concentrations by vehicle brand are BMW (77.46%) and Mini (22.5%); (9) The top 3 geographical concentrations by postal code are FR1 "Île-de-France" (20.97%), FR2 "Paris Bassin" (15.88%) and FR8 "Mediterranean" (14.36%); and (10) 49.29% WA discounted contractual residual value component.

-- Relevant credit enhancement is in the form of subordination. Credit enhancement levels are sufficient to support DBRS’s projected expected credit loss assumptions under various stress scenarios at AAA (sf) and A (sf).

-- The ability of the transaction to withstand stressed cash flow assumptions and repay investors according to the terms under which they have invested.

-- The transaction parties’ capabilities with respect to originations, underwriting, servicing and financial strength.

-- The credit quality of the collateral and ability of BMW Finance to manage collections activities on the collateral.

-- The legal structure and presence of legal opinions addressing the assignment of the assets to the Issuer and the consistency with DBRS’s “Legal Criteria for European Structured Finance Transactions.”

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable is “Rating European Consumer and Commercial Asset-Backed Securitisations.” Other methodologies and criteria referenced in this transaction are listed at the end of this press release and can be found at http://www.dbrs.com/about/methodologies.

The sources of information used for this rating include BMW Finance and Crédit Agricole CIB. DBRS considers the information available to it for the purposes of providing this rating was of satisfactory quality. DBRS does not audit the information it receives in connection with the rating process, and it does not and cannot independently verify that information in every instance.

This rating concerns a newly issued financial instrument. This is the first DBRS rating on this financial instrument.

Information regarding DBRS ratings, including definitions, policies and methodologies are available on www.dbrs.com.

To assess the impact of changing the transaction parameters on the rating, DBRS considered the following stress scenarios, as compared to the parameters used to determine the rating (the Base Case):

-- Probability of Default Rate Used: Base Case PD of 3.62%, a 25% and 50% increase on the base case PD.
-- Recovery Rate Used: Base case Recovery Rate of 64.57%.
-- Residual Value Loss: Base Case AAA (sf) of 36.07%, Base Case A (sf) of 26.46% and a 25% and 50% increase in Residual Value Loss.

DBRS concludes that for the Class A notes:
-- A hypothetical increase of the base case PD and LGD by 25%, ceteris paribus, would lead to maintain the rating of the Class A notes to an AAA (sf) rating.
-- A hypothetical increase of the base case PD and LGD by 50%, ceteris paribus, would lead to downgrade the rating of the Class A notes to an AA (sf) rating.
-- A hypothetical increase of the base case Residual Value Loss by 25%, ceteris paribus, would lead to a downgrade of the Class A notes to an AA (sf) rating.
-- A hypothetical increase of the base case Residual Value Loss by 50%, ceteris paribus, would lead to a downgrade of the Class A notes to an AA (sf) rating.
-- A hypothetical increase of the base case PD and LGD by 25% and a hypothetical increase of the Residual Value Loss by 25%, ceteris paribus, would lead to a downgrade of the Class A notes to an AA (high) (sf) rating.
-- A hypothetical increase of the base case PD and LGD by 50% and a hypothetical increase of the Residual Value Loss by 25%, ceteris paribus, would lead to a downgrade of the Class A notes to an AA (low) (sf) rating.
-- A hypothetical increase of the base case PD and LGD by 25% and a hypothetical increase of the Residual Value Loss by 50%, ceteris paribus, would lead to a downgrade of the Class A notes to an AA (sf) rating.
-- A hypothetical increase of the base case PD and LGD by 50% and a hypothetical increase of the Residual Value Loss by 50%, ceteris paribus, would lead to a downgrade of the Class A notes to an A (high) (sf) rating.

DBRS concludes that for the Class B notes:
-- A hypothetical increase of the base case PD and LGD by 25%, ceteris paribus, would lead to a downgrade of the Class B notes to an A (sf) rating.
-- A hypothetical increase of the base case PD and LGD by 50%, ceteris paribus, would lead to a downgrade of the Class B notes to a BBB (high) (sf) rating.
-- A hypothetical increase of the base case Residual Value Loss by 25%, ceteris paribus, would lead to a downgrade of the Class B notes to an A (low) (sf) rating.
-- A hypothetical increase of the base case Residual Value Loss by 50%, ceteris paribus, would lead to a downgrade of the Class B notes to a BBB (low) (sf) rating.
-- A hypothetical increase of the base case PD and LGD by 25% and a hypothetical increase of the Residual Value Loss by 25%, ceteris paribus, would lead to a downgrade of the Class B notes to a BBB (sf) rating.
-- A hypothetical increase of the base case PD and LGD by 50% and a hypothetical increase of the Residual Value Loss by 25%, ceteris paribus, would lead to a downgrade of the Class B notes to a BBB (low) (sf) rating.
-- A hypothetical increase of the base case PD and LGD by 25% and a hypothetical increase of the Residual Value Loss by 50%, ceteris paribus, would lead to a downgrade of the Class B notes to a BBB (low) (sf) rating.
-- A hypothetical increase of the base case PD and LGD by 50% and a hypothetical increase of the Residual Value Loss by 50%, ceteris paribus, would lead to a downgrade of the Class B notes to a BB (high) (sf) rating.

For further information on DBRS historic default rates published by the European Securities and Markets Administration in a central repository, see:
http://cerep.esma.europa.eu/cerep-web/statistics/defaults.xhtml.

Ratings assigned by DBRS Ratings Limited are subject to EU regulations only.

Initial Lead Analyst: David Sanchez Rodriguez
Initial Final Rating Date: 30 April 2015
Initial Final Rating Committee Chair: Chuck Weilamann
Lead Surveillance Analyst: Vito Natale

DBRS Ratings Limited
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Registered in England and Wales: No. 7139960.

The rating methodologies and criteria used in the analysis of this transaction can be found at:
http://www.dbrs.com/about/methodologies.

Rating European Consumer and Commercial Asset-Backed Securitisations
Legal Criteria for European Structured Finance Transactions
Operational Risk Assessment for European Structured Finance Servicers
Derivative Criteria for European Structured Finance Transactions
Unified Interest Rate Model for U.S. and European Structured Credit